Cost Pressures Drive Significant Rise in Propylene Oxide Prices, Multiple Listed Companies Respond

Affected by Middle Eastern geopolitical tensions, restricted navigation through the Strait of Hormuz has triggered fluctuations in the global energy and chemical supply chains. The epoxide propylene (PO) market has experienced a significant upward phase, drawing market attention.

As of March 23, the spot price of epoxide propylene in Shandong exceeded 11,400 yuan/ton, a 31.50% increase from February 28, reaching a four-year high. From the transmission pathway, this round of market movement is primarily driven by cost factors. Domestic epoxide propylene import and export volumes are minimal, and geopolitical conflicts have not directly altered the supply-demand structure. In the short term, prices are supported by raw material premiums, but in the medium to long term, the market will gradually revert to fundamentals driven by capacity release and demand recovery.

Responses from Listed Companies

Data from Business Society monitoring shows that the benchmark price of epoxide propylene on March 23 was 11,466.67 yuan/ton, a 43.11% year-on-year increase. According to Longzhong Information, the main transaction range in the Shandong market has risen to 10,800-11,500 yuan/ton, with high-end prices approaching the regional high of 11,140 yuan/ton in 2023.

The continuous rise in epoxide propylene prices has also attracted attention regarding the impact on the performance of related listed companies. Currently, main companies involved in epoxide propylene in A-shares include Binzhou Chemical (601678), Satellite Chemical, Wanhua Chemical (600309), Weiyuan Co., Jinhui Technology (000818), Huatai Co. (600308), and Hongbaoli (002165). Among these, Binzhou Chemical, Satellite Chemical, and Wanhua Chemical are industry leaders with significant capacity.

Recently, Jinhui Technology stated on an interactive platform that its epoxide propylene plant is operating at full capacity. Huatai Co. mentioned that it has an 80,000-ton annual capacity for epoxide propylene, mainly for external sales, and recent fluctuations in raw material and product prices have had limited impact on Q1 performance. Hongbaoli revealed that its epoxide propylene production facilities are still undergoing technical upgrades and have not yet resumed production; it is expected to restart before the end of June this year. Industry experts generally believe that companies with well-established integrated supply chains are better equipped to withstand raw material price fluctuations.

Analysis indicates that this round of epoxide propylene price increases features rapid escalation, with cost transmission as the core logic. Rising international oil prices have driven up key raw materials such as propylene, pure benzene, and methanol. Propylene prices have reached near seven-year highs, and supply of pure benzene in Southeast Asia has decreased due to force majeure, further amplifying raw material price increases. The costs of various epoxide propylene production processes have risen simultaneously, prompting companies to passively raise ex-factory prices, with mainstream manufacturers like Binzhou Group and Lihuayi Weiyuan increasing quotes to 11,600 yuan/ton.

Cost transmission from upstream to downstream has driven continuous price increases in epoxide propylene, which in turn has led to passive price rises in downstream products such as polyether polyols and propylene glycol. For example, on March 24, propylene glycol prices increased by 10.81%, and soft foam polyether prices rose by over 1,000 yuan/ton.

Market Outlook and Structural Differentiation

From the supply-demand perspective, China’s epoxide propylene industry has entered the era of 10 million-ton capacity, with projected industry capacity reaching 10.4 million tons/year by 2026, a 20% year-on-year increase. Leading companies like Wanhua Chemical, Satellite Chemical, Binzhou Chemical, and Weiyuan Co. dominate the capacity landscape, with industry concentration continuing to rise.

On the demand side, over 75% of epoxide propylene is used in polyether polyols, which are applied in furniture, automotive, construction insulation, and new energy battery packaging. In March, downstream demand showed a basic need-driven pattern but was resistant to high prices. Utilization rates of polyether polyol capacity remain at 61.90%, and propylene glycol capacity utilization is at 49.75%. Downstream companies are less willing to chase high prices, and market sentiment remains cautious, leading to a slowdown in cost transmission.

Regarding future trends, industry analysts believe that in the short term, Middle Eastern geopolitical premiums have not yet dissipated, and prices of crude oil and propylene remain high, supporting a sustained strong or volatile epoxide propylene market. Additionally, operational disruptions in raw material facilities may indirectly impact PO industry operating rates, creating phased supply tightening expectations.

In the medium to long term, if geopolitical conflicts ease and energy premiums decline rapidly, falling raw material prices will help bring PO prices back to fundamentals. Conversely, prolonged conflicts could tighten basic chemical raw material supplies, further increasing industry costs and maintaining high prices. Meanwhile, domestic epoxide propylene capacity continues to expand, and phased supply-demand mismatches may pose risks, with industry facing dual pressures of rising costs and capacity expansion.

Industry institutions such as Zhuochuang Information and Business Society state that the current epoxide propylene market is characterized by “cost-driven, supply-demand following” dynamics. The Middle Eastern situation, as an external variable, only influences the market through cost channels and does not alter China’s core self-sufficiency pattern. For industry companies, comprehensive supply chain layout, cost control capabilities, and high-end demand adaptation will be key competitive advantages. Leading enterprises, leveraging scale and technological strength, are better positioned to resist raw material price fluctuations and capacity expansion pressures. As geopolitical tensions gradually clarify, the epoxide propylene market is expected to move away from cost-pulse influences and return to a supply-demand driven trajectory, with further industry structural differentiation becoming evident.

(End of translation)